Impact investors, you have nothing to lose but your nerve

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2022, so far, has not been kind to investors. Supply chain backlogs, post-Corona demand spikes, widespread inflation, and a war in the heart of Europe have caused already volatile markets to tank. Traditional stakeholders, from retail investors to venture capitalists, are taking precautions, reevaluating portfolios, and erring on the side of caution. Steady traditional value investing has once again come to fill a space where ambitious growth stocks had come to dominate.

Yet, even in these tumultuous times, there is one group of investors that must not put on the brakes. Rather, social impact investors – coming from a unique subsector of finance that provides funding to those addressing social and environmental challenges – must now put their foot on the gas and push ahead.

The reason for this is simple. Impact investors are not focused on the explicit bottom-line of quantifiable financial returns. In contrast, they seek to redirect resources and expertise toward what the UN has termed Sustainable Development Goals (SDGs). Today, a growing number of international investors are looking beyond the ARR bottom lines, and are encouraging companies to act responsibly, in order to positively impact our world.

The terms Environmental, Social, and Governance (ESG), Socially Responsible Investing (SRI), Social Impact Investing (SII), and Sustainable Development Goals (SDG) are often used interchangeably, causing confusion. In reality, each has a distinct meaning, with significant, and important, nuances between each term.

ESG, is focused on a company’s policy towards environmental, social, ethical and governance practices. SRI involves adding additional clear-cut criteria related to ethical considerations when analyzing investments. SII (social impact investing, or just ‘impact investing’ for short), concentrates on nurturing businesses which themselves have a positive impact on their surroundings. The challenge, therefore, is how to scale this innovation and spread it to those who need its benefit most.

Indeed, Sustainable Development Goals (SDG) provide a vital framework, consisting of 17 interlinked global goals which are designed to be a “blueprint to achieve a better and more sustainable future for all”, to guide that impact investing.

In recent years, impact investing from an innovation hub and technological powerhouse such as Israel has proven to add incredible value.  The hub of creativity enables the investor to leverage strong local connections to social entrepreneurs, innovators, and investors, all of whom are part of Israel’s start-up nation synergetic network; particularly in the sectors of agrotech, health, education and employment, energy, and water.

A synergetic ecosystem bolstering the investment can further be leveraged utilizing what is known as an ‘Incubation & Distribution Model’.  This takes the accumulated local knowledge and expertise of the experienced investor, while accelerating distribution amongst an alliance of businesses and decision-makers in the target countries.

Integrating socially impactful technologies in projects through risk-adjusted and impact-enhancing financial packages can therefore create sustainable businesses that are well suited to both generating a profit and addressing social goals. Importantly, the profits realized can then be reinvested with the aim of expanding the business’ activity and intensifying the social impact.  Growing the ecosystem, growing the impact.

One particular example of an exciting investment being integrated into projects in this synergetic ecosystem is the Israeli agritech company, SupPlant.

SupPlant is a world leader in agricultural IOT (Internet of Things). Its AI system uses sensitive sensors to collect data from plants and fruits, reporting on the plant’s condition at any given moment to the farmer. The system analyzes the data using sophisticated algorithms, and translates it into simple, actionable irrigation commands, ensuring a healthy and stable crop with minimal water consumption in real time.

In case of distress or warning, the farmer is alerted and receives treatment guidelines in real time via their cellphones.

SupPlant’s technology saves farmers an average of 30% of water expenditure, raising crops by an average of five percent. This fundamental change in irrigation methods has the potential to save water on a global scale, improving productivity and yield, saving inputs and money for farmers from America to Africa. It is the apogee of impact investing. In Kenya alone, some 500,000 smallholder maize farmers are already benefitting from this technology, helping them avoid crop failures, and increasing their yields.

This example is a mere drop in the ocean in relation to the tidal wave of potential impact investing holds. So, when the stock market is shaky, tech valuations are diving, and returns across the board are unpredictable; impact investing must continue.  Perhaps now, more than ever, forging together the synergetic power of talent, capital, and expertise to craft holistic value-chain solutions to the world’s most defining development needs has never been more important.

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Merav Galili

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